Good afternoon, everyone, and welcome to our earnings call for the first quarter of 2020. On our call today, our CFO, Mark Friedrich, and our CIO, Johannes Laumann, will present you the results and most relevant events of the first quarter of this year. After the presentation, we are happy to answer your questions. The presentation shown is available on our website. Before I start, I would like to remind you that this call and presentation contains forward-looking statements, including projections, which may not develop as we currently expect. I therefore kindly ask you to take note of the precautionary warning about forward-looking statements that is included in the materials on our website. Now let me hand over to Johannes.
Good afternoon, everybody. I would like to go through the business model with a little bit of flashback of the transaction we have done in 2020, as well as the closings which have happened so far in the first quarter. Please allow me to start with a business model overview, which we would like to show you in the following way, that we put our realignment, optimization, and harvesting into reflection of the target of our doing here in the holding. The consulting income, the cash flow growth, and dividends are our main focus after the acquisition of a company.
Starting from the consultant income, followed by dividends, we are targeting to reflect a five times return on invested capital, which then in the harvesting part can, or is targeted as an idea to go up to 5 to 10 on the total overall life cycle of our portfolio companies. How to realize this is our key asset and our USP is the value creation. The consideration of taking calculated risks evaluated by our M&A team as well as our large operational experience, which we currently have under our wings with, as end of quarter one, 64 consultants on our payroll. We request additional funding from the seller in order to make happen the turnaround of the business and then, with our own people together with the management, we do the successful turnarounds and we stick to the DNA, what we have.
Important to know, the management holds more than 40% of the shares. This is unchanged to prior year as well. Here you see a track record, which provides the foundation of our business model. You see the vintage portfolio and our portfolio outlook. This has also been shown in a similar way during the bond presentations. The vintage portfolio currently contributed a return on invested capital by 5.6 times, which is mainly driven by dividends as well as consulting income. As the return on invested capital is one of our main driver of KPIs as well as the return on equity. On the booked equity, as you can see here on the chart, we are focusing on those two numbers from now on.
As a reference and in comparison to the book equity, we have put a NAV, end of last year with EUR 220 million, which will discontinue from now on, and we will focus on ROE, sorry, and ROIC. The highlights on the Q1 2020. We have conducted two structured and planned exits. We have exited the Polish business of Balcke-Dürr, and we have exit in a management buyout the Czech business of BEXity in the first quarter. We have conducted new acquisitions, one add-on acquisitions on a strategic side for Balcke-Dürr in Italy with Loterios, which enlarges the portfolio and the new customer entries for Balcke-Dürr.
Then we have signed two new acquisitions with Nexive, which we have already told in the annual call as well as we have signed last Friday a takeover of an automotive supplier from Cooper Standard corporate carve-out, and I will say a few words later on. Additional progress, the add-on of Ruukki completes the Donges Group, in order to become number one player on the Nordic market and a very important player when it comes to steel structures in whole Europe. Under the new brand, Nordec, we firmed the new acquisitions of Ruukki Construction together with the existing brand of Normek. As you know, in Q1, we have also successfully placed a EUR 50 million bond, capital raise, and we have announced the distribution of EUR 1 dividend in our annual meeting, which will take place next Monday. Coming quick to the three acquisitions we have signed.
We talked in the annual call about the add-on of Balcke-Dürr and Nexive, which we expect to be closed in Q2 this year. Last Friday we have announced the signing of a project, which is called Gemini Rail Group, which is a platform investment from Cooper Standard, with a pretty good fit to our Elastomer Solutions. Synergies involved there. Main facilities in Poland, Italy, and India. We have a proper plan to turn this business around as well as having synergies with Elastomer Solutions, which will form then a nice group. Also in quarter one, not only three acquisitions were signed, we also closed three acquisitions. We closed PrimoTECS Automotive Supplier bought from Tekfor. We closed keeeper tableware acquisition from the Metsä Tissue Corporation. Both of the transactions were signed shortly before Christmas.
Last but not least, after an intense merger control process, we closed Nordec, which is former Ruukki Building Systems. At the end of April, the closing took place. Signing already took place last year, July. This brings us to the overview of the portfolio, where you see with the Gemini Project and PrimoTECS, an increase in automotive and mobility, where I also believe that as an impact of COVID-19, we do see a lot of potential and a lot of good opportunities within the second half of this year. Also in engineering and technologies, we do see a lot of opportunities bringing in with Balcke-Dürr or platform investments and goods and services with BEXity, with KICO, with SMP. We have beneficiaries of the COVID-19 on the operational side, but we also see quite a few approaches on potential add-on acquisitions for those companies.
As an outlook when it comes to the portfolio, I do see maybe once in a lifetime opportunities on the buy side in the second half of the year. I also see quite good opportunities on the sell side, when it comes to companies who did run quite stable through the COVID-19 crisis. This closes the update Q1 on the portfolio. I will hand over to Mark Friedrich now for the financial part.
Thanks, Johannes. As always, we start the financial part with an overview of the key financial data, then look into the consolidated statement of profit and loss and the balance sheet, then go through the different developments in our different segments and close the section with the new overview of the life cycle development. Starting with the key financial data, we have for the first time, sales that are higher than EUR 300 million in one quarter, mainly due to the M&A activity that we saw in 2019 and in the beginning of 2020. Group EBITDA dominated by this M&A activity. We will see that this is mainly derived from the bargain purchase income, mainly from the transactions of PrimoTECS. On the other hand, Q1 is always the most challenging quarter for us, since we have a couple of bigger groups which have a weaker Q1, especially the Balcke-Dürr group.
That together with the new acquisitions that contribute mostly negative, we have a group-adjusted EBITDA of EUR -10. Due to the bond raised, group cash and cash equivalents increased substantially in Q1 to more than EUR 140, and equity ratio decreased slightly. Looking at the P&L of Q1, we see that sales significantly increased compared to Q1 2019 due to the new acquisitions that were all acquired after Q1 in 2019 and that were acquired in Q1 2020. On the next page, the adjusted EBITDA shows again, the development that we normally see when we acquire a lot of new companies. We have a high income from bargain purchases here with more than EUR 50 million in Q1.
On the other hand, we just started the restructuring in most of these companies and most of these new companies and had on the other hand, also a bit of restrictions due to travel restrictions of COVID-19. The income from bargain purchase, like already mentioned, comes mainly from PrimoTECS with approximately EUR 40. It's all preliminary. On the other hand, keeeper tableware, which account for most of this income from bargain purchase. The deconsolidation of the exits that Johannes mentioned will be accounted for in Q2, since the transactions were closed in Q2. On page 15, the balance sheet, as always, when we do a lot of transactions, the total assets increase. In this case, a bit more than 20%. We see that here, especially the financial liabilities, long and short-term increase substantially.
This is mainly due to the bond raise, but also to the debt that we cluster here for IFRS 16, which account for approximately EUR 120 million in non-current liabilities and approximately EUR 30 million in the other financial liabilities. Coming to the different segment development, it's quite different, starting with automotive and mobility. This is obviously, as probably already everybody knows, the most challenging segment. We see a substantial increase of sales that is mainly due to the new acquisitions of Plati, KICO, and PrimoTECS, which account for approximately EUR 40 million in Q1 2020. On the other hand, as you might have already heard yesterday, the sales level of STS decreased by approximately EUR 20 million in Q1. The high M&A activity is reflected here in the EBITDA, which is significantly positive and significantly increased compared to last year.
On the other hand, the adjusted EBITDA is negative due to these new acquisitions, which contribute all negatively in Q1. Together with the reduction of STS, we see here minus EUR 3 million. Looking ahead here, the COVID-19 environment will be challenging or is challenging in Q2, and we will see how it develops, especially in the automotive part. We are, as pretty much the entire industry, highly affected by the shutdown of the OEM plants. The engineering and technology segment is quite mixed with Balcke-Dürr and EUPEC contributing negatively in terms of adjusted EBITDA, and Donges and Gemini contributing positively. Here, the completion of part of the restructuring of the Donges Group contributes positively compared to last year.
On the other hand, Balcke-Dürr had quite a challenging first quarter, especially compared to last year, where the company or the group is always in a special environment in Q1 since most of the services and service contracts kick in in the Q2. Business activity is not very high in Q1, and together with the early shutdown of Italy, which is a bigger part of the Balcke-Dürr Group now, they had a bit of a setback in Q1 compared to last year. On the other hand, Gemini, especially also developed compared with Donges Group quite positively in Q1. Here we see that the completion of restructuring in 2019 now brings fruits to Gemini with a positive EBITDA, and we believe that this will also be, in the next quarters, the case for Gemini. Coming to the last segment, goods and services, which substantially increased in terms of sales.
In Q1 2019, we had only two companies, Klann and Cenpa, which accounted for these EUR 8 million. Now with these bigger groups, especially BEXity, sales are substantially increasing. We have here a couple of new acquisitions like BEXity and Trefil and Keepler, the adjusted EBITDA decreased compared to last year, which is quite normal since we just started, especially at BEXity, the restructuring. Just to give you a figure here, BEXity accounts for approximately EUR 2 million negatively in the adjusted EBITDA. This brings us to the life cycle status of our portfolio. We reshuffle, compared to the segment presentation now, our portfolio into the different life cycle stages that Johannes introduced in the beginning. Let me start with the change compared to the end of 2019.
We moved Plati and Keepler from realignment to optimization. We moved or we kind of switched Balcke-Dürr and Donges, where Donges moved up and Balcke-Dürr moved down to optimization. Reasoning from our side was that we have sold the Polish business, which was quite positively. On the other hand, Balcke-Dürr acquired with Loterios a new company and has now more an optimization in front of the group where they have to consolidate the Italian locations. That's why we consider this company more in the optimization phase. On the other hand, the completion of the Ruukki transaction moved the Donges Group upward since the restructuring and integration went quite well. We think that the integration of Ruukki was quite well prepared already in Q1. That's why we believe the Donges Group is now in the harvesting stage.
You see here that in our business model, the realignment is always negatively contributing in terms of adjusted EBITDA. It is also in Q1, and we will see this throughout the year 2020. Optimization, it's also negatively. This EUR 5 million loss here of adjusted EBITDA is pretty much only related to the BEXity Group. BEXity had a EUR 5 million adjusted EBITDA loss in Q1, and the other one combined pretty much break even. Harvesting contributed slightly positively, especially nice or when we would look at it compared to last year, especially Donges Group moved from a negative contribution to a positive contribution. Also Elastomer was able to contribute positively in Q1, which might change in Q2. With this, I hand over again to Johannes for the closeout.
All right. Thank you very much, Mark. Before we come to the Q&A, a quick consolidation, a quick summary. We expect a challenging environment of COVID-19 with the existing portfolio, but at the same time, of course, as I said before, it can be a once in a lifetime opportunity for the M&A activities in the second half of the year. We already signed three transactions. We already did two exits. The speed of transactions and the number of transactions are in line with past year, and I'm looking very positively forward to the second half. The troops are ready here. We see more and more opportunities coming into the pipeline.
The target revenues, as expected, and as already said, we expect more than EUR 1.5 billion for this financial year, which is of course mainly driven by the acquisitions we have done in the second half of last year, and which we have also done in the beginning of this year. If you want to name it's Nexive, it's BEXity, and it's Cooper Standard acquisition, which is all of them close to EUR 200 million in sales or slightly above even. We have PrimoTECS with EUR 100 million of sales, and the other add-on acquisitions with closer to EUR 50 million. The M&A drives that revenue up significantly. As always said, we want to sustain the dividend capacity and be very attractive and aggressive there as well. You saw that our main trigger will be return on invested capital, which has a direct impact on our dividend capacity.
Last but not least, we would like to give you a outlook. In October this year, we again will hold a capital markets day. It's going to be the second one after last year. You will receive an update in the next couple of weeks and months. It's planned, you can have a wild guess, but it's the Frankfurt skyline. It's planned again in Frankfurt. The location will be communicated then, as soon as we know if we will hold it digital or if we will hold it physically. At the moment, it's still planned physically in Frankfurt, but we will announce if it will be turned into digital. Thank you very much. With this slide, I will hand back to the moderator for the question and answer sessions.
The first question is from Sascha Rutzger, Pareto Securities. Your line's now open.
Yes. Good afternoon. Sascha Rutzger from Pareto Securities. Thank you for taking my question. I have three questions. Maybe we can take them one by one. First, related to the pandemic and the impact on your reported figures. We haven't seen so much impacts on the reported figures. Maybe you can shed some light on the related impacts on revenues and earnings. You mentioned the impact in the automotive segment, but, do you have also segments which even benefited from the pandemic?
Let me try to answer this. It's a little bit difficult because it implies that I can look forward and make a prediction if it comes back or when it is over, which is a little bit difficult. Indeed, we see the largest impact in the automotive segment, and if you see the productions volumes, which the OEMs has also disclosed of April, you see a decrease of 80%-90% of the output, which has a direct impact, of course, on the automotive suppliers such as the STS Group, such as PrimoTECS, or KICO. With Elastomer and Plati, we also are active in other businesses, so the hit there is not as hard. Secondly, we have companies like Donges Group, where it's a little bit diverse.
There are sub-companies where we are impacted, like Kalzip, where the travel ban or the travel restriction has a direct impact on revenues and profit. Infrastructure projects are coming now out more and more, which is then the benefit of Donges SteelTec. There we have a little bit a pair on this. Of course, we also have beneficiaries of this. We didn't know that when we bought keeeper tableware, but in fact they do produce toilet paper, which of course had a very positive impact in the pandemic. We see both, but the major hit, of course, we see in our portfolios. On the automotive side, it's hard to predict on the revenue scale. The OEMs expect 30% lower output for the rest of the years compared to the original.
This is what we follow at the moment on our plans and budget as well. We just follow what the OEMs are predicting, which is roughly on the 30% base, lower output for the rest of the year compared to original budget.
Okay, fine. Thank you. Maybe related to the recent acquisitions and the expected bargain purchases of these acquisitions. You booked in Q1, EUR 54 million, out of three acquisitions. Looking at your recent acquisitions, which are not yet closed together, they are, I would guess, twice as big as these three acquisitions. Is it fair to assume that you will probably book in Q2 bargain purchases of more than EUR 100 million?
Well, the final booking is, of course, then also related to the purchase price allocation of the same. If you take your number and let us a little bit of flexibility of 20%-25%, you're maybe not so wrong.
Okay. Certainly on Balcke-Dürr, you mentioned the weakness at Balcke-Dürr. What of these weaknesses, operational and what is related to the new acquisitions? Do you expect the weaker performance at Balcke-Dürr to continue in the next quarter?
To start with the last, do we expect even weaker performance in the next quarter? The answer is no. Balcke-Dürr was driven by two things. It was about the postponement of a project of the German entity. By having the acquisition of Loterios, having STF acquisition from last year and having the original Balcke-Dürr Italiana business. The business exposure of the Balcke-Dürr Group now with the exit of the Polish business. The business exposure of Balcke-Dürr in Italy significantly increased. As you know, March in Italy was a complete lockdown. The revenue it was zero basically. There was the large postponement of a project in Germany when it comes to the erection and commissioning, which also contributed heavily on this one.
It was a mix of Italy and the postponement of a project in Germany, which will be caught up, maybe not all in Q2, but then we look quite okay into the 2020 of Balcke-Dürr. Q1 was due to those facts, heavily under pressure. Italy now has reopened. The factories are running on a lower capacity, but they are running again so that we will see contributions coming from there in Q2 definitely.
Okay. Maybe just a quick one. What is your consulting income on annual base, with your latest transactions?
It will be in the range of EUR 20 million-EUR 25 million, closer to the EUR 25 million.
Okay, perfect. That's it from my side. Thank you very much.
Pleasure.
The next question is from Holger Steffen, SMC Research. Your line is now open.
Yeah. Good afternoon, all together. I have some further questions. First of all, thank you for your detailed Q1 report. Because of several acquisitions, you have achieved a strong growth. I think, as usual, you have elaborated the effects of consolidation on the revenue. Can you perhaps give us this figure?
You mean the revenue added due to acquisitions?
Yes.
Okay. Give us a second. Do you have another question?
I have some questions. I start with another one. You've said the acquisition of PrimoTECS led to an income from bargain purchases of nearly EUR 40 million. Can we suppose that this is a sign for a very high operating loss of this company?
It's rather an extreme strong asset base than a high loss.
Oh, okay. I wonder therefore a little bit that the loss of realignment companies in Q1 totals to only EUR 6 million, because you bought big companies. What's the explanation for this?
The first thing, and maybe then I hand over to Mark. The first thing is we did negotiate well, Holger.
Yeah, okay.
I think when you see PrimoTECS and BEXity as the two big buys in this one. BEXity did quite well in Q1, was not so badly hit by COVID-19. As said, PrimoTECS is not a heavy loss-making company. The sale of this company had another strategic reason from Tekfor Group.
Okay.
The sales added by acquisitions account for approximately EUR 100 million.
EUR 100 million. Okay, thank you. You've spoken about synergies between Elastomer and the Cooper Standard activities. Do you plan to combine these companies? What's the part of Plati which has synergies with Elastomer, too?
We keep the companies legally separate, or the companies are separate, let's say it that way. However, there are operational synergies when it comes to raw material supply, when it comes to combined sales, and when it comes to combined administration. The synergies with Plati are more on the geographical side than on the product side, while the synergies between the Cooper Standard purchase and Elastomer are more on the product and customer side.
My last question regarding the liquidity of your companies. STS Group has announced yesterday a good development of liquidity in the first quarter. What's the actual situation of KICO? Are there now, after several weeks of COVID, further companies which have a difficult liquidity situation?
I think the first part of the question, it is difficult. Also for KICO it's difficult. We are currently in the situation where the OEM started to open the plants, but on a very low level. It looks more like a flatter start instead of just a jump. We work together with all portfolio companies. It's not only KICO. With all portfolio companies, we work on securing the liquidity in all means, including all stakeholders. Meaning suppliers, customers, officials, and that sometimes includes us. It's a situation where we have, in the entire group, situations where we need to support. For example, also, we supported the closing of Ruukki for the Donges Group. This was plans that we supported. They said also that due to the less activity, like Kai said, they see a bit of reduced liquidity.
It is in pretty much every portfolio company, except for the ones that probably profit a bit from the situation, like [SunPower], we pretty much have no issue. For all others, we have implemented quite strong measures to secure the liquidity.
Has any company got loans from public health programs in the meantime?
Actually, only the STS Group in France.
Okay. Thank you very much. That's all my time.
STS group in France, but also EUPEC already received a loan to trade.
Oh, okay. Thank you.
The next question is from Felix Eisel from Conduction Capital. Your line is now open.
Hi, Conduction Capital. I guess I spelled it wrong. A quick question to Johannes, a nuanced one. You talked about the good opportunities you see on the buy side, which is probably obvious given the current situation, but also about the good opportunities on the sell side. Could you maybe elaborate on that, where that instinct or that statement is coming from? What are you seeing? Are you seeing approaches from potential buyers on assets that look particularly stable on your end, or how did that statement come about? Thank you.
Difficult to answer too much in detail, Felix . We see potential approaches from the buyer side, potential buyer side. We see after quite a bit of silence in the last months and years, Chinese coming back to the European market and try to look for companies. That's number 2. Number 3, we do have active processes running where we look for potential divestment of companies, where we get feedback already.
Very good. Sounds good. Thanks.
At the moment, we have no further questions. As a reminder, if you would like to ask a question, please press zero and one on your telephone keypad. As we have no further questions, I would like to hand back to you two for some closing remarks.
Thank you very much for participating in this call today, and we wish you all a great rest of the day, and until next time, stay safe and goodbye.